* U.S. Justice Dept warns changes could open “loopholes”
* Others see negative effect on business deals abroad
By Andrea Shalal-Esa
WASHINGTON, June 14 (Reuters) - The Obama administration defended its stepped up enforcement of a U.S. law banning bribery of foreign officials, and warned lawmakers that changes could open loopholes for wrongdoers.
“Foreign corruption remains a problem of significant magnitude,” Greg Andres, deputy assistant attorney general in the Justice Department’s criminal division, told the House Judiciary Committee’s subcommittee on crime, terrorism and homeland security.
“The problem is as big as it’s ever been, if not bigger,” Andres said, citing a World Bank estimate that more than $1 trillion in bribes are paid each year, amounting to about three percent of the overall world economy.
Tougher enforcement of the act by the Justice Department and the Securities and Exchange Commission has raised U.S. business concern over its impact, even as other countries move to tighten their own anti-bribery statutes.
U.S. government officials are worried that amending the law could signal a weakening of Washington’s commitment to prosecuting bribery cases.
Representative James Sensenbrenner, the Wisconsin Republican who chairs the panel, said lawmakers were drafting a bill that would more clearly state “the rules of the road” associated with the 1977 Foreign Corrupt Practices Act (FCPA).
“There is no question on my mind that we have to bring this law up to date,” Sensenbrenner said, citing concerns that the law was being enforced in a “vague and impenetrable manner,” which put U.S. companies at a disadvantage compared to Chinese companies that did not have to comply with such strict laws.
He said most U.S. companies opted to settle bribery cases rather than letting them go to trial, which meant there were few rulings that could help define the limits of the law. That in turn inflated the government’s prosecutorial discretion.
Prosecutors won their first conviction in a jury trial involving the law in California last month, and eight additional cases are heading for trial soon. [ID:nN11209432]
Companies were uncertain about who qualified as a foreign official, what percentage of state ownership made a foreign company an instrument of the state, and how expensive a gift had to be to be considered a bribe, Sensenbrenner said.
Representative Robert Scott, the subcommittee’s top Democrat, questioned whether the department’s “overly aggressive enforcement” and lack of “clear standards and guidance” could be stifling business growth overseas.
Former Attorney General Michael Mukasey, who was hired in March by the U.S. Chamber of Commerce to lobby for reforms of the 34-year-old law, presented six specific reforms.
He said his top priority was adding a “compliance defense” to the law, which would allow companies to rebut criminal liability if the offending individual had circumvented the company’s compliance measures. Adding the provision would encourage companies to set up their own compliance programs.
In its current form, the law left companies vulnerable to civil and criminal penalties for conduct by rogue individuals or units beyond their control or knowledge, he said.
Former Deputy Attorney General George Terwilliger told the hearing that uncertainty about the law was prompting some U.S. companies to forego business opportunities overseas.
But the Justice Department’s Andres said prosecutors followed strict guidelines when deciding whether to charge a company and weighed many factors, including the seriousness of the crime, a company’s past history, whether it had a compliance program in place, and whether it reported the violation itself.
He bristled at the suggestion that companies were being charged with bribery for small outlays such as paying for a foreign official’s taxi ride or taking them out to lunch.
Spelling out detailed exceptions could “send a message that we were sanctioning some type of bribery,” he said. “If companies aren’t paying bribes, they have nothing to fear with regard to prosecution.”
Enforcement of the law has gone up sharply since 2005 by both the Justice Department and the SEC. The SEC brought 15 cases in 2010, up from four cases in 2005, while the Justice Department brought 24 cases last year, up from five in 2005. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)